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ArcelorMittal made a strong pitch for eligibility before the committee of creditors (CoC) on Wednesday, but if asked to pay dues on account of defaulting companies, it might consider as a goodwill gesture.

“We believe our position is strong on both (Uttam Galva and KSS Petron) and that is what we presented yesterday. And if we have to do anything, then that is as a gesture of goodwill,” said a company source on the issue of repayment of dues.

The CoC is expected to meet on Saturday, after which a formal notice for ‘curing’ the ineligibility is likely to be served to ArcelorMittal and Numetal.The CoC met both the bidders on Wednesday, who made presentations on their eligibility. The dues on account of the two companies — Uttam Galva and KSS Petron — will be around Rs 70 billion. Sources close to the development said lenders had indicated to ArcelorMittal that it would have to clear dues on account of the two companies at the meeting. ArcelorMittal is already understood to have offered Rs 53 billion for Uttam Galva to banks.

ArcelorMittal held a 29 per cent stake in Uttam Galva Steels, a non-performing asset (NPA) for more than a year, which became a technical ground for ineligibility in the first round of bidding, under Section 29A (c). ArcelorMittal was a co-promoter of Uttam Galva but did not have management control or board representation.

However, ahead of the Essar bid, it transferred its shares in Uttam Galva to the promoter family at Rs 1 a share. Even though it had applied for declassification from the stock exchanges as a promoter, immediately after the sale of shares, it came through much later. The resolution professional, based on legal advice, found ArcelorMittal ineligible and disqualified its bid in the first round.

The NCLT’s Ahmedabad Bench, where ArcelorMittal and Numetal had challenged their disqualification, however, remanded the first round of bids back to the resolution professional and the CoC for consideration. But Numetal challenged the order in the NCLAT on the grounds that the 30-day cure period suggested by the tribunal for ArcelorMittal was not applicable to it. ArcelorMittal too filed an appeal in the National Company Law Appellate Tribunal (NCLAT) against the NCLT order, that the observations against it be set aside and its resolution plan be held valid.

In its appeal, the firm mentioned that the shares of Uttam Galva lost considerable value and an impairment was taken in the books of ArcelorMittal Netherlands BV (AMNLBV) in 2015 and a large part of the cost of acquisition was written off. AMNLBV also commenced a discussion with the founder promoters of Uttam Galva to persuade them to buy back their shares in Uttam Galva, which lasted from 2015 to February 7, 2018, when the shares were finally sold off. It also said that no bank or financial institution ever reached out to AMNLBV to address the problem of NPA in Uttam Galva.

With regard to KSS Petron, ArcelorMittal said in its filing, the NCLT erred in holding that L N Mittal is a promoter and in management and control of KSS Global BV, and KSS Petron, which is a 100 per cent subsidiary of KSS Global BV, is also under the same management and control.

Mittal had indirectly invested in a Luxembourg company (Fraseli), which in turn, invested in KSS Global BV. Minority rights were available to the Luxembourg company in relation to its investment in KSS Global BV. “This does not constitute being in management and control. The opinion received by the resolution professional correctly came to the conclusion that negative rights such as veto in relation to certain resolutions do not constitute being in management and control of a company,” ArcelorMittal said in its appeal before the NCLAT.

The resolution professional’s legal advisors were divided on KSS Petron but finally went with the view that negative control did not constitute ‘control’ for the purposes of Section 29A(c) of the IBC and accordingly , KSS Petron was not a ground for disqualifying ArcelorMittal India.

Mittal had sold his shares in KSS ahead of submission of Essar bid. However, the NCLT Ahmedabad said that sale of shares and declassification did not absolve them from responsibility. The order pointed towards payment of overdue amount as a cure for ineligibility.